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SAN FRANCISCO and WUXI, China, NOV. 20 /PRNewswire/ -- Suntech Power
Holdings Co., Ltd. (NYSE: STP), the world's largest photovoltaic (PV) module
manufacturer, today announced financial results for the third quarter ended
September 30, 2008.
Third Quarter Highlights(1)
-- Third quarter 2008 total net revenues grew 53.7% year-over-year to
$594.4 million.
-- On a consolidated basis, GAAP gross margin increased to 21.6% for the
third quarter 2008 compared to 20.7% for the third quarter 2007. Non-
GAAP(2) gross margin reached 21.8% for the third quarter 2008, compared
to 21.4% for the third quarter 2007.
-- GAAP net income for the third quarter was $55.9 million or $0.33 per
diluted American Depository Share (ADS). On a non-GAAP basis,
Suntech's net income for the third quarter was $60.3 million or
$0.35 per diluted ADS. Each ADS represents one ordinary share.
-- Suntech's PV cell production capacity was 750MW at the end of the
third quarter 2008.
-- Due to the depreciation of the Euro versus the U.S. dollar combined
with the impact of tighter credit markets, Suntech has revised its full
year 2008 revenue guidance from a range of $2.05 billion to
$2.15 billion to a new expected range of $1.85 billion to $1.87
billion. Suntech has revised its full year 2008 PV product shipment
target from 550MW to approximately 490MW.
"Our third quarter performance was driven by healthy demand for our solar
products, resulting in strong top-line growth that exceeded the high end of
our guidance," said Dr. Zhengrong Shi, Suntech's Chairman and CEO. "However,
the rapid weakening of the Euro relative to the USD over the past two months
combined with the unstable credit markets has created a challenging
environment in the fourth quarter of 2008. This has resulted in a faster than
expected sequential decline in sales prices and the deferment of some customer
orders, which will significantly impact our profitability in the fourth
quarter of 2008."
"Due to these near-term challenges, we have been implementing a range of
measures to prudently manage this temporary downturn. These include the
minimization of cash outlays, renegotiation of high priced, short-term silicon
contracts, optimization of our supply chain and production, and the
enhancement of currency risk management. We believe that these steps will
enable us to weather the short term market disturbances and we expect our
profitability will steadily improve in 2009 as multiple long term, low cost
silicon contracts initiate delivery."
''In addition, we believe that the industry recalibration will benefit
Suntech as we expect a flight to quality solar companies that are positioned
to be long-term leaders in the solar industry," continued Dr. Shi.
''Suntech's exceptional project history, dedication to innovation and focus on
producing premium quality solar products differentiate Suntech's products and
brand. Moreover, our localized customer service, broad product range and
manufacturing scale provide a stable base to serve our customers' long-term
needs. We are confident that our customers recognize the value in partnering
with Suntech, and we expect to improve our market position in 2009.''
"Suntech's goal is to drive down the cost of solar to grid parity, and
these macroeconomic changes should accelerate the reduction in silicon costs
and sales prices and stimulate demand. In addition, the outlook for 2009
demand is encouraging. Although customers have deferred some orders in the
fourth quarter, many are committing to increased volumes for 2009 indicative
of customers' confidence that the financing environment will improve. We have
already received orders for over 600MW of PV products for 2009 from our
European customers and are pursuing a growing pipeline of additional orders."
Recent Business Highlights
Acquisitions and Joint Venture Agreements
-- Suntech acquired EI Solutions, a leading California-based commercial
solar system integration company, to provide complete solar solutions
to commercial, utility and government customers in the U.S.. Renamed
Suntech Energy Solutions, it has designed and implemented solar
projects for many leading US companies, including Google, Disney, Sony
Pictures, The North Face, and Puget Sound Energy.
-- Suntech established a joint venture with MMA Renewable Resources to
create Gemini Solar Development Company (Gemini Solar), to develop and
finance photovoltaic projects 10MW and larger. Gemini Solar will
provide an end-to-end solution to address the growing demand for large-
scale solar projects.
Suntech Energy Solutions Projects
-- Suntech Energy Solutions recently substantially completed numerous
installations including:
-- A distribution center for The North Face in Visalia, CA which
included a 1MW installation of Suntech modules on tracking
systems in a 5 acre retention pond abutting the facility.
-- A 250kW rooftop installation for a carport at Caltech in
Pasadena CA.
-- A 250kW ground mounted tracking system for the luxury
eco-resort Post Ranch Inn, in Big Sur, CA.
-- A 100kW carport installation for The Venetian Hotel in Las Vegas,
NV.
Capital and Credit Facilities
-- Suntech had cash and cash equivalents of $394.6 million, restricted
cash of $124.1 million and short term investments of $145.6 million
as of September 30, 2008. In addition, Suntech had value-added tax
recoverable of $201.8 million at the end of September 30, 2008 of
which approximately $126 million has been approved for refund by
the P.R.C. government.
-- Suntech had approximately $1.7 billion of approved credit lines to be
used for fixed asset purchase, working capital or trade financing as of
September 30, 2008. Of these credit facilities approximately $1.1
billion had been drawn down as of September 30, 2008. During the fourth
quarter, Suntech has secured a further $600 million of credit
facilities, which can be utilized for fixed asset purchase, working
capital or trade financing. Suntech expects that its capital will be
sufficient to cover its capital expenditures in 2008 and 2009, while
maintaining adequate working capital to support its operations.
Technology
-- Suntech is on track to expand Pluto PV cell production capacity
from 10MW to 30MW by the end of 2008. During the temporary period
of downturn, Suntech intends to accelerate retrofitting of existing
lines to Pluto technology and achieve 100MW of Pluto PV cell
capacity by the end of the first quarter 2009.
Collaboration on Climate Change
-- Suntech joined The Climate Group, a global independent organization
dedicated to accelerating action on climate change. Suntech is the
first and only energy company to join The Climate Group. The
Climate Group is an independent, nonprofit organization that works
with government and business leaders to accelerate the transition
to a low-carbon economy.
Third Quarter 2008 Results
Non-GAAP Non-GAAP
Net Gross Gross
Revenues Profit Margin
(in $ % of Net (in $
millions) Revenues millions) (%)
Standard PV Modules $523.1 88.0% $122.2 23.4%
Others $71.3 12.0% $7.5 10.5%
Total Net Revenues $594.4 100% $129.7 21.8%
Total net revenues for the third quarter of 2008 were $594.4 million,
representing an increase of 53.7% from the corresponding period in 2007.
Non-GAAP gross profit for the third quarter of 2008 was $129.7 million, an
increase of 56.6% year-over-year. Non-GAAP gross margin for the Company's
standard PV module business was 23.4% and non-GAAP consolidated gross margin
was 21.8%. Gross margin decreased from the second quarter of 2008 primarily
due to a decrease in the average selling price resulting from the depreciation
of the Euro versus the U.S. dollar and a slight increase in silicon wafer
costs.
Non-GAAP operating expenses in the third quarter of 2008 totaled $37.1
million or 6.2% of total net revenues. The sequential increase in operating
expenses was primarily due to increased spending on research and development
of the Pluto technology.
Non-GAAP income from operations for the third quarter of 2008 was $92.6
million, an increase of 43.1% year-over-year. Non-GAAP operating margin was
15.6%.
Net interest expense was $7.9 million in the third quarter of 2008
compared to net interest expense of $5.2 million in the second quarter of 2008.
The sequential increase in net interest expenses was primarily due to
increased bank borrowing balances.
Foreign currency exchange loss was $16.6 million in the third quarter of
2008 compared to a foreign currency exchange gain of $2.5 million in the
second quarter of 2008. The foreign currency exchange loss in the third
quarter of 2008 was primarily due to the revaluation of some assets, which
were impacted by the depreciation of the Euro against the U.S. dollar, and the
revaluation of some liabilities, which were impacted by the appreciation of
the CNY against the U.S. dollar.
Net other expenses decreased from $6.3 million in the second quarter of
2008 to $3.2 million in the third quarter of 2008. The decrease was mainly
due to the reduced mark-to-market valuation losses associated with foreign
currency derivative instruments.
Non-GAAP net income for the third quarter of 2008 was $60.3 million, or
$0.35 per non-GAAP diluted ADS, compared to non-GAAP net income of $61.2
million, or $0.36 per non-GAAP diluted ADS in the third quarter of 2007.
On a GAAP basis, for the third quarter of 2008 gross profit was $128.3
million, an increase of 60.4% year-over-year. Gross margin for the standard
PV module business was 23.1% and consolidated gross margin was 21.6% for the
third quarter of 2008.
On a GAAP basis, operating expenses for the third quarter of 2008 were
$41.3 million or 6.9% of total net revenues. Income from operations was $87.1
million for the third quarter of 2008, an increase of 52.0% year-over-year.
Operating margin was 14.6%. Net income increased 5.0% year-over-year to $55.9
million, or $0.33 per diluted ADS.
In the third quarter of 2008, capital expenditures, which were primarily
related to production capacity expansion and the construction of Suntech's new
production facilities, totaled $102.4 million and depreciation and
amortization expenses totaled $10.2 million.
As of September 30, 2008, Suntech had cash and cash equivalents of $394.6
million, compared to $605.2 million as of June 30, 2008. The decrease in cash
and cash equivalents was mainly due to capital expenditures related to
capacity expansions and prepayments to suppliers. This was partially offset by
an increase of bank borrowings.
Value-added tax recoverable totaled $201.8 million as of September 30,
2008, compared to $143.0 million as of June 30, 2008. The increase was mainly
due to the long clearance process required by local regulation. Approximately
$126 million value-added tax recoverable has been approved for refund by the
P.R.C. government of which approximately $15 million is expected to be
refunded in the fourth quarter of 2008.
Inventory totaled $247.9 million as of September 30, 2008 compared to
$182.6 million as of June 30, 2008. The increase in inventory was partially
due to the late receipt of raw materials from some silicon suppliers due to
storm weather in the U.S. at the end of the third quarter.
Accounts receivable increased from $218.9 million as of June 30, 2008 to
$232.8 million as of September 30, 2008. Days sales outstanding were 36 days
in the third quarter of 2008 compared to 41 days in the second quarter of 2008.
Business Outlook
During the quarter ended September 30, 2008 the average value of the U.S.
dollar was $1.50 to the Euro. Assuming an exchange rate of $1.28 U.S. dollars
to the Euro in the fourth quarter of 2008, the Euro will have depreciated
approximately 15% against the U.S. dollar sequentially resulting in an
approximate $45 million impact on fourth quarter 2008 gross profit and
approximately 12 percentage point impact on gross margin.
Based on current operating conditions and assuming an exchange rate of
$1.28 U.S. dollars to the Euro for the fourth quarter, Suntech expects
revenues for the fourth quarter of 2008 to be in the range of $345 million to
$360 million. The sequential decline in revenues primarily reflects the
depreciation of the Euro versus the U.S. dollar, the deferment of some
customer orders due to delays in project financing and the seasonality impact
due to winter in Northern Europe.
Assuming an exchange rate of $1.28 U.S. dollars to the Euro for the fourth
quarter, GAAP consolidated gross margin for the fourth quarter 2008 is
expected to be marginally positive or breakeven. The sequential decline in
gross margin primarily reflects the decline in product sales prices due to the
rapid depreciation of the Euro versus the U.S. dollar, the negative impact of
high cost inventories from the third quarter of 2008, and the high cost of raw
materials purchased in October 2008.
Due to the abnormal depreciation of the Euro versus the U.S. dollar and
the tighter credit markets, Suntech has reduced full year 2008 revenue
guidance from a range of $2.05 billion to $2.15 billion to a range of $1.85
billion to $1.87 billion. Suntech has revised its full year 2008 PV product
shipment target from 550MW to approximately 490MW. Suntech remains on target
to reach 1GW of installed PV cell production capacity by year-end 2008.
Suntech expects full-year 2009 shipments of more than 800MW. Suntech
intends to hold PV cell production capacity at 1GW in 2009 until credit market
visibility has improved. Suntech expects to reduce capital expenditures to
approximately $80 million in 2009 from approximately $300 million in 2008. The
majority of 2009 capital expenditures will be utilized to retrofit existing
production capacity to the high efficiency, Pluto technology.
New Senior Management Hires and Promotions
Mr. Steven Chan, Suntech's Chief Strategy Officer, has assumed the
additional role of President, Global Sales/Marketing. Mr. Chan, who is also
responsible for the Company's business development and investor relations
functions, joined Suntech in 2006. Originally based in the Company's Wuxi,
China headquarters, Mr. Chan moved to San Francisco last year to open its U.S.
headquarters and to focus on expanding its global sales and marketing
initiatives.
Mr. Roger Ye, Suntech's Sales Director, has been promoted to Vice
President of Global Sales. Mr. Ye joined Suntech in 2006 and has since led
Suntech's global sales efforts. Prior to joining Suntech, Mr. Ye spent eight
years with Siemens Limited China where he progressed through a number of sales
management roles, ultimately being promoted to Sales Director. He earned a
Masters degree from Shanghai Jiaotong University majoring in Photovoltaics.
Mr. Mauro Sgherri joined Suntech to assume the role of Managing Director,
Italy, based in Milan, with responsibility for all sales and business
development activities in Italy. Prior to joining Suntech, Mr. Sgherri was a
consultant to the Board of Directors of Sharp Italy for the establishment of
their solar division, and in establishing relationships with leading systems
integrators and customers. He brings more than 30 years of business
experience in sales management, product management and marketing strategy. Mr.
Sgherri holds a degree in Business Management.
Mr. Thilo Kinkel has joined Suntech to assume the role of Director of
Sales, Central Europe. Mr. Kinkel will be based in Frankfurt, Germany. Prior
to joining Suntech, Mr. Kinkel was Sales Coordinator and Key Account Manager
for Schott Solar GmbH, a photovoltaic manufacturer in Germany. He brings over
9 years of experience in the sales and development of markets for
photovoltaics and glass. Mr. Kinkel attended the University of Applied Science
in Giessen-Friedberg where he studied Industrial Engineering.
Mr. Bert van Kampen has joined Suntech in the role of Financial Controller,
Suntech Europe, based in Suntech's recently opened office in Switzerland. Mr.
Van Kampen was most recently Financial Director of Makhteshim-Agan Industries
in Switzerland, where he had responsibility for accounting, reporting,
budgeting, cash management, treasury and tax, as well as human resources,
legal and IT. He brings more than 20 years of experience in financial
management to Suntech, as well as implementation of internal control
procedures. Mr. van Kampen attended the Economic College (HEAO-BE).
Corporate Governance
In November 2007, the Company revised its Corporate Governance Guidelines
to reduce the minimum size of the Audit Committee from three members to two
members. Currently, Mr. Julian Worley and Mr. Jason Maynard, both independent
directors, serve on the Audit Committee.
Third Quarter 2008 Conference Call Information
Suntech management will host a conference call today, Thursday, November
20, 2008 at 8:00 a.m. Eastern Standard Time (which corresponds to 9:00 p.m.
Beijing/Hong Kong time and 1:00 p.m. Greenwich Mean Time on November 20, 2008)
to discuss the Company's results.
To access the conference call, please dial +1-617-213-8835 (for U.S.
callers) or +852-3002-1672 (for international callers) and ask to be connected
to the Suntech earnings conference call. A live and archived webcast of the
conference call will be available on Suntech's website at
http://www.suntech-power.com under Investor Center: Financial Events.
A telephonic replay of the conference call will be available until
December 3, 2008 by dialing +1-617-801-6888 (passcode: 43949184).
About Suntech
Suntech Power Holdings Co., Ltd. (NYSE: STP) is a world-leading solar
energy company as measured by both production output and capacity of solar
cells and modules. Suntech is passionate about improving the environment we
live in and dedicated to developing advanced solar solutions that enable
sustainable development. Suntech designs, develops, manufactures, and markets
a variety of high-quality, cost-effective and environmentally friendly solar
products for electric power applications in the residential, commercial,
industrial, and public utility sectors. Suntech offers one of the broadest
ranges of BIPV products under the MSK Solar Design Line(TM). Suntech has
sales offices worldwide and is a market share leader in key global solar
markets. For more information, please visit http://www.suntech-power.com .
Safe Harbor Statement
This press release contains forward-looking statements. These statements
constitute "forward-looking" statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and as defined in the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates" and similar statements,
including the ability to achieve 1 GW PV cell production by year end 2008, the
Euro/USD and CNY/USD exchange rate, the ability to successfully implement
measures to manage the recent economic downturn, our ability to improve our
market position in 2009, our ability to achieve grid parity, our ability to
successfully close the 600MW of received orders for 2009, expected revenue and
gross margin for Q4 2008, expected 2008 full year revenue and product shipment
targets, and expected 2009 revenue. Such statements involve certain risks and
uncertainties that could cause actual results to differ materially from those
in the forward-looking statements. Further information regarding these and
other risks is included in Suntech's filings with the U.S. Securities and
Exchange Commission, including its annual report on Form 20-F. Suntech does
not undertake any obligation to update any forward-looking statement as a
result of new information, future events or otherwise, except as required
under applicable law.
About Non-GAAP Financial Measures
To supplement its consolidated financial results presented in accordance
with GAAP, Suntech uses the following non-GAAP measures which are adjusted
from the most directly comparable GAAP results to exclude items related to
share-based compensation, restructuring expenses and amortization expenses
incurred from the purchase price allocation effect related to the MSK
Corporation and KSL-Kuttler Automation Systems GmbH acquisition. Suntech
believes that non-GAAP information is useful for analysts and investors to
evaluate Suntech's future on-going performance because they enable a more
meaningful comparison of Suntech's projected cash earnings and performance
with its historical results from prior periods. This information is not
intended to represent funds available for Suntech's discretionary use and is
not intended to represent or to be used as a substitute for gross
profit/margin, operating expenses, operating income or net income as measured
under GAAP. Many analysts covering Suntech use the non-GAAP measures as well.
These non-GAAP measures are not in accordance with or an alternative for GAAP
financial data, the non-GAAP results should be reviewed together with the GAAP
results and are not intended to serve as a substitute for results under GAAP,
and may be different from non-GAAP measures used by other companies. For more
information on these non-GAAP financial measures, please see the tables
captioned "Reconciliations of non-GAAP results of operations measures to the
nearest comparable GAAP measures" set forth at the end of this release and
which shall be read together with the accompanying financial statements
prepared under GAAP.
(1) Selected highlights of the Company's third quarter 2008
results are set forth in the text of the release and should be read
together with the detailed financial statements at the end of this
release.
(2) All non-GAAP measures exclude share-based compensation expenses,
restructuring expenses and amortization expenses incurred from
purchase price allocation related to the acquisitions of MSK
Corporation and KSL-Kuttler Automation Systems GmbH. For further
details on non-GAAP measures, please refer to the reconciliation table
and a detailed discussion of management's use of non-GAAP information
set forth in this press release.
Note: The quarterly consolidated income statements are unaudited. The
condensed consolidated balance sheets are derived from Suntech's
unaudited consolidated financial statements.
-- Financial Tables to Follow --
SUNTECH POWER HOLDINGS CO., LTD.
CONDENSED CONSOLIDATED BALANCE SHEET
(In $'000)
As of As of
June 30, Sep 30,
2008 2008
ASSETS
Current assets:
Cash and cash equivalents 605,180 394,550
Restricted cash 115,712 124,142
Inventories 182,574 247,885
Accounts receivable 218,867 232,775
Value-added tax recoverable 143,034 201,800
Advances to suppliers 49,004 77,268
Short-term investments 147,594 145,594
Other current assets 112,992 155,436
Total current assets 1,574,957 1,579,450
Property, plant and equipment, net 411,995 574,899
Intangible assets, net 157,633 160,828
Goodwill 75,355 78,821
Investments in affiliates 123,363 132,921
Long-term prepayments 186,721 250,761
Long-term loan to a supplier 83,479 83,821
Amount due from related parties 270,457 287,142
Other non-current assets 110,611 191,995
TOTAL ASSETS 2,994,571 3,340,638
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings, including
current portion of long-term bank
borrowings 556,071 704,120
Accounts payable 75,853 84,682
Other current liabilities 114,231 161,595
Total current liabilities 746,155 950,397
Long-term bank borrowings 9,609 6,893
Convertible notes 1,075,000 1,075,000
Accrued warranty costs 32,599 36,498
Other long-term liabilities 47,844 129,113
Total liabilities 1,911,207 2,197,901
Minority interest 6,351 8,090
Total shareholders' equity 1,077,013 1,134,647
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 2,994,571 3,340,638
SUNTECH POWER HOLDINGS CO., LTD.
CONSOLIDATED INCOME STATEMENTS
(In $'000, except share, per share, and per ADS data)
Three months Three months Three months
ended ended ended
Sep 30 June 30 Sep 30
2007 2008 2008
Total net revenues 386,652 480,179 594,403
Total cost of revenues 306,625 364,382 466,065
Gross profit 80,026 115,797 128,338
Selling expenses 8,329 14,751 14,774
General and administrative expenses 10,317 20,318 21,808
Research and development expenses 4,094 3,310 4,682
Total operating expenses 22,739 38,379 41,264
Income from operations 57,287 77,418 87,074
Interest expenses (6,509) (13,866) (16,661)
Interest income 8,071 8,653 8,805
Foreign exchange gain (loss) (1,026) 2,493 (16,612)
Other income (expense) 1,813 (6,329) (3,171)
Income before income taxes 56,011 68,369 59,435
Tax provision (3,532) (3,517) (3,651)
Net income after taxes before
minority interest and equity in
earnings of affiliates 52,479 64,852 55,784
Minority interest 763 355 141
Equity in earnings of affiliates 16 -- --
Net income 53,258 65,207 55,925
Net income per share and per ADS:
- Basic 0.35 0.42 0.36
- Diluted 0.32 0.38 0.33
Shares and ADSs used in
computation:
- Basic 152,187,168 153,935,960 155,835,915
- Diluted 169,784,511 185,244,933 185,490,716
Each ADS represents one ordinary share
Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures (*)
(in $ millions, except margin data, per share and per ADS data, unaudited)
Three months ended Sep 30, 2007
Share- Effect of
based Purchase Restructuring
GAAP Compensation Price Expenses Non-GAAP
Results Allocation Results
Gross profit 80.0 2.8 0.0 -- 82.8
Gross margin 20.7% 21.4%
Income from operations 57.3 6.6 0.8 -- 64.7
Income from operations
margin 14.8% 16.7%
Net income 53.3 6.6 0.5 0.8 61.2
Net income margin 13.8% 15.8%
Net income per share and per
ADS
-Basic 0.36 0.40
-Diluted 0.32 0.36
Three months ended June 30, 2008
Share- Effect of
based Purchase Restructuring
GAAP Compensation Price Expenses Non-GAAP
Results Allocation Results
Gross profit 115.8 1.5 1.1 -- 118.4
Gross margin 24.1% 24.7%
Income from operations 77.4 4.3 2.7 -- 84.4
Income from operations
margin 16.1% 17.6%
Net income 65.2 4.3 1.8 -- 71.3
Net income margin 13.6% 14.9%
Net income per share and per
ADS
-Basic 0.42 0.46
-Diluted 0.38 0.41
Three months ended Sep 30, 2008
Suntech Share- Effect of Suntech
Group based Purchase Restructuring Group
GAAP Compensation Price Expenses Non-GAAP
Results Allocation Results
Gross profit 128.3 1.4 -- -- 129.7
Gross margin 21.6% 21.8%
Income from operations 87.1 3.9 1.6 -- 92.6
Income from operations
margin 14.6% 15.6%
Net income attributable to
holders of ordinary shares 55.9 3.9 0.5 -- 60.3
Net income margin 9.4% 10.1%
Net income per share and per
ADS
-Basic 0.36 0.39
-Diluted 0.33 0.35
(*) The adjustment is for share-based compensation, restructuring expenses
and the amortization expenses incurred from purchase price allocation
related to the acquisitions of MSK Corporation and KSL-Kuttler
Automation Systems GmbH.
For further information, please contact:
In China:
Rory Macpherson
Investor Relations Director
Tel: +86-21-6288-5574
Email: rory@suntech-power.com
In the United States:
Sanjay M. Hurry
Vice President
The Piacente Group, Inc.
Tel: +1-212-481-2050
Email: suntech@tpg-ir.com
SOURCE Suntech Power Holdings Co., Ltd.
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